Leasing Farm Land in Minnesota

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Leasing Farm Land in Minnesota Powered By Docstoc
					Leasing Farm Land
in Minnesota
Susan E. Stokes
Farmers’ Legal Action Group
(FLAG)
What is a farmland lease?

  A lease is an agreement between a
  landowner and a tenant to rent farmland.

  Note: This presentation does not cover
  rental of a residence or home on
  farmland. There are additional laws that
  apply to that situation.
Basic lease terms:
Lessor and Lessee
  The Lessor is the person who owns the
  land.

  The Lessee or tenant is the person who
  rents the land from the
  Lessor/landowner.
Does a lease have to be in
writing?
  Real estate (land) leases for more than one
  year must be in writing.
  If the rental term for land is less than one year,
  a verbal lease is as valid as a written lease and
  is legally enforceable, as long as there is
  agreement on the basic terms.
  A written agreement can help avoid confusion,
  especially if a dispute arises in a relationship.
Does a lease have to be in
writing? (continued)
  If a dispute arises about a verbal lease, how
  will it be resolved?
  If a landowner or tenant wants to enforce a
  verbal agreement, they will likely have to go to
  court.
  In deciding whether a verbal agreement was
  reached, courts look at evidence to determine
  the intent of the parties. With a verbal lease, it
  can be one person’s word against the other
  person’s word – difficult to prove.
Does a lease have to be in
writing? (continued)

  A “year” means 12 months. If a lease covers a
  crop year and the crop year is less than 12
  months, a written lease is not required. But if
  the crop year is more than 12 months, the
  lease must be in writing.

  If a lease is required to be in writing but it is
  not, it generally is not enforceable, with few
  exceptions.
What is required to create a
legally enforceable written
lease?
  If a lease is required to be in writing, a
  formal contract is not always required. As
  long as the writing contains the basic
  terms, a letter or a memorandum can be
  enforceable as a formal lease
  agreement.
What is required to create a
legally enforceable written
lease? (continued)
  These basic terms are required:
   1) names of the landowner and the tenant;
   2) a description that identifies the land to be
     rented;
   3) a description of what is being paid for the
     land; and
   4) usually, signatures of both the landowner
     and the tenant.
What is required to create a
legally enforceable written
lease? (continued)
  Once there is a written lease, the written
  document is what governs the
  relationship between the landowner and
  the tenant.
  Any changes to the lease should also be
  in writing. Verbal changes to the terms
  will usually not be enforced.
Negotiating a lease
  Landowners may have their own forms, but
  tenants do not have to accept the standard
  language in these agreements. Any of the
  terms are negotiable. Some landowners may
  be more willing than others to negotiate.
  Negotiating price: many factors go into what
  price is paid, including the amount of land you
  are renting, the amount that is tillable, the
  quality of the land, whether irrigation is
  available.
Payments/Price
  Rent for a farm lease can be paid in any number of
  ways. The two most common are cash leases and crop
  share leases.
  Cash lease: the tenant pays a set amount of money in
  exchange for the use of the land. Payment may be
  made in one payment or several payments.
  Crop share lease: the landowner gets a share of the
  proceeds of the crop as rent. These can be flexible –
  for example, based on the price the farmer actually
  gets for the crop.
  Some farmers do a combination of the two.
Types of Leases Determine
Length and Ending of Lease
  Tenancy for years: This is a lease for a
  fixed period, not necessarily for a number
  of years. So it could be for 90 days, six
  months, five years, etc., but not more
  than 21 years in Minnesota.

    A tenancy for years does not automatically
    renew. It ends on the date specified in the
    lease. No notice of termination is required.
Types of Leases Determine
Length and Ending of Lease
(continued)


     Tenancy at will: Lease with no fixed term.
     Sometimes these are called month-to-
     month or year-to-year tenancies. If there
     is no term specified in the agreement, it
     is a tenancy at will.
        A tenancy at will continues until it has been
        ended by proper notice from one of the
        parties. It can be ended at any time with
        proper notice.
Types of Leases Determine
Length and Ending of Lease
(continued)

        Generally, to end a tenancy at will, the landowner or
        the tenant must give three months’ notice. But if the
        tenant is required to make monthly rental payments,
        ending the lease requires a one-month notice.

        However, if the tenant fails to pay rent or neglects
        the property, the landowner may end the tenancy at
        will lease with 14 days’ written notice.

     As with all contracts, courts will look to the
     intent of the parties in deciding the terms of
     any lease.
Holdover tenancies
  Sometimes a tenant remains on rented land after the
  lease has ended. If it is done without the approval of
  the landowner, it is called “holding over.” There are
  risks to “holding over.” What are the options if a tenant
  holds over?
     If the landowner agrees to the holding over, the parties could
     create a new lease.
     A tenancy at will might be created, using the terms of the
     original lease.
     If the landowner does not agree, the landowner can treat the
     tenant as a trespasser and evict the tenant. If the landowner
     decides to treat the tenant as a trespasser, the landowner
     cannot try to collect rent from the holdover tenant. If the
     landowner accepts rent from the holdover tenant, the
     landowner cannot treat the tenant as a trespasser.
The tenant owns the crop
  Crops grown on leased land are the personal property
  of the tenant. This is true even if the rent to be paid is a
  share of the crop.
  What happens if the tenant is prevented from
  harvesting the crop – for example, because of bad
  weather that prevents harvest before the lease ends or
  the tenant violates the lease in the middle of the lease
  term?
     The lease may be renewed. If the problem is delay in the
     harvest, speak with the landowner as soon as possible to seek
     a lease extension.
     The landowner may allow the tenant to harvest the crop. If so,
     however, the tenant must pay the market value rent for the use
     of the property until the crop is harvested.
     If the landowner does not allow the tenant to harvest the crop,
     the landowner must pay the tenant the net value of the crop.
Obligations of tenant

  To pay rent. If a tenant fails to pay rent
  due, the landowner has the right to end
  the lease after giving the tenant 14 days’
  written notice.
  If the lease does not specify anything
  about farming practices, the general rule
  is that the tenant is free to farm in ways
  that are “commonly accepted” in the
  community.
Obligations of tenant (continued)
  A tenant can not commit “waste,” whether or
  not it is mentioned in the lease. Waste is when
  the tenant’s activities cause the farm land to be
  permanently or severely damaged. Examples
  that might constitute “waste” would be
  removing valuable topsoil from the property or
  using chemicals or pesticides on organic land
  or land in conservation programs.
  Do not dispose of solid waste on your rented
  land. That includes garbage, sludge, any
  discarded materials, whether liquid or solid that
  result from your operation.
Obligations of tenant (continued)

  Minnesota law prohibits burning of tires
  or plastics. Minnesota law also prohibits
  the burning or burying of household
  hazardous waste, appliances, air
  conditioners, household batteries, used
  motor oil, and car batteries.
  Tenants are responsible for their actions
  and the actions of the tenant’s guests,
  family members, and employees.
Potential problems to be
aware of
  Make sure you talk with the actual owner of the
  land. If you are subleasing, you need to make
  sure the person you are dealing with has the
  authority (permission) to rent the land.
  Have a clear understanding of what the
  landowner’s expectations are with regard to
  farming practices, especially regarding the use
  of pesticides or other chemicals.
Potential problems to be
aware of (continued)
  Staying overnight on your land. If the lease
  does not forbid it, it probably is legal to stay
  overnight on the land. If a tenant is going to
  stay overnight on the land, it is advisable to tell
  the landowner. The landowner may not want to
  risk the liability for any harm that comes to the
  tenant. There may also be questions about
  what is allowed on the land – such as setting
  up a tent or other structure. It also is a safety
  concern for the tenant – for example, if a storm
  is coming, no one nearby will know the tenant
  is there to warn them to seek shelter.
Final words of advice

  If you want or expect to rent the land
  from year-to-year, it is best to get it
  in writing.
Farmers’ Legal Action Group (FLAG)
360 North Robert Street, Suite 500
Saint Paul, Minnesota 55101-1589

Phone: 651-223-5400
Toll-free in Minnesota: 1-877-860-4349
Fax: 651-223-5335

Email: lawyers@flaginc.org
Website: www.flaginc.org

				
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